The Australian Prudential Regulation Authority (APRA) has disqualified the former CEO of Xinja Bank and one other director from being or acting as accountable persons of any authorised deposit-taking institution (ADI) under the Financial Accountability Regime (FAR) for failing to comply with their accountability obligations.
Former CEO Eric Wilson has been disqualified for a period of eight years, while non-executive director Craig Swanger has been disqualified for 10 years. They are the first disqualifications under the FAR.
Xinja, now known as A.C.N. 618 937 054 Limited, is in liquidation after returning deposits and handing back its ADI licence to APRA in 2021.
The disqualifications follow an extensive investigation by APRA into the impact that “side agreements” between Xinja and some of its investors had on Xinja’s capital position during 2020 and whether APRA was misled in relation to the bank’s capital position. APRA’s investigation commenced in May 2021 and the disqualifications have been subject to review processes.
Between May and August 2020, Xinja entered into agreements with three investors purporting to raise CET1 capital. CET1 capital is considered the highest quality of capital because it does not result in any repayment or distribution obligations on an institution. Xinja represented to APRA that this capital was CET1 capital. However, the transactions involved Xinja entering into side agreements together with share subscription agreements with the investors. The side agreements contained additional terms that undermined the investments’ status as CET1 capital, in turn undermining APRA’s capital regime.
APRA determined the actions of Mr Wilson and Mr Swanger in relation to this matter breached the Banking Executive Accountability Regime, which was superseded by the FAR in March last year.
APRA sets requirements on ADIs’ minimum capital to ensure they can absorb unexpected losses in their business and to support financial system stability. It is a key pillar of APRA’s “unquestionably strong” capital requirements for Australian ADIs. Complying with laws and regulations governing capital raising and reporting is a key responsibility of accountable persons of ADIs.
